Ethical issues faced by Proton Car

Ethical issues faced by Proton Car

Now a day businesses are considering ethical issues as a terms of administrative compliance to cope with legal environments and following internal organizational rules and regulations. It is also true that following business ethics not only motivate employees but also help them to perform at their level best. The impacts of different ethical issues faced by Proton Car of Malaysia are discussed below:

a. Rights, conflicts and responsibilities:

While Proton car was established in Malaysia, they don't have the skill and technology to run this business swiftly as a result they hired technology and skill from Mitsubishi Motors Corporation. As the technological and knowledge shifted they started to produce on their own effort. This means, Proton Car Corporation is depended on the skill of the labor. So they must give them some rights to motivate them and increase the profitability. As it engaged in global business the necessity for giving the employee rights increased much. Now Proton car have 10,300 employees to cover up its activities.

As over 42% of the equity is held by the Malaysian Government the employees of Proton car enjoy various rights and facilities like others Government employees. Moreover their jobs are secured and they receive proper training form the company. As the agreement, Mitsubishi Motor Corporation was responsible for the construction, training, supervision, preparation for production for all the staff of Proton Car. As a result Proton car send their employees to Japan for receiving all short of training needed by them. And the working environment is safe as to meet the international standard. Mitsubishi Motor Corporation also sends their experts to supervise the employees and ensure the working conditions of the Proton Car.

Conflicts are mainly conflicts of interest. That means conflicts may lies on the relationship of employees and Proton car. As most of the employees are Malaysian and Proton car is Government organization and supervised by the employees of Mitsubishi Motor Corporation it becomes hard for the local employees to be supervised by others who are not belongs to this organization. Conflicts may also occur among the various departments of the organizations. As for example, marketing department may want a huge budget for the promotional activities of the brand but finance department may minimize the costs by cutting the budget of marketing department. On the other hand there may also conflict between the organization and shareholders. As for example, as Proton car received huge government assistance on tax and others sections shareholders may want a good premium from the organization, giving less premium may also be a reason for conflict.

Proton car was established for developing the manufacturing industry of Malaysia, upgrade technology and industrial skills and increasing international competitiveness of the country. In the beginning Mitsubishi Motor Corporation was responsible for plant construction, training and supervision of preparations for production and technical assistance in localization. So while the employee becomes skill enough after receiving proper training they shifted their responsibility as a result every employees know what can they do? And what should they do? So the responsibility of all the department of Proton Car is well organized.

b. Marketing

The motto of Proton car is “We charge the exact opposite as our equally rubbish rivals, Electron Cars!” This motto expresses the marketing strategy of Proton Car. They give emphasis on the cost effective production of the product. As Malaysia is a developing country this strategy fits very much with the market. And as a result they became market leader of Malaysian car industry in a very short time. Over 42% of total equity of Proton Car owned by the Government they also use this for inspiring people for purchasing their product. They tell that if you love your country you should buy Proton Car. They used the patriotism of the people for gaining market share. But while in 2005 the market share of proton car fall from 60% to 30% in Malaysia they need to develop their marketing strategy. As a result they started Proton XChange in 2006 that offers they will change the car used over 10 years. This strategy suit very much with the market environment of Malaysia and help them to in the market share. Proton car also gave emphasized on the quality improvement of product and production. And they launched “Zero Defect” campaign to compete with the foreign competitor and erase the bad reputation of the organization. These strategies help them to become the market leader again.

c. Professionalism

Though most of the share of Proton car is held by the Government of Malaysia, it is not a charitable organization. To fulfill its mission and the needs of the others shareholders they need to be professional in their work. After launching the venture in 1983 Proton car was in a good position and gradually became market leader of the Malaysian car industry. For continuing the success it made acquisition of Lotus and MV Agusta Corporation. But in 2005 their market share decreased from 60% to 30%. For recovering this they took some strategy that was fruitful for them and again started to capture market share. The sales volumes of Proton for 2006 to 2007 financial year are shown in the figure below:

The professional behavior and strategy helps them to recover their condition after the fall. The revenue report of Proton also given below:

d. Information Technology

Information technology plays a vital role of the production of the Proton Car. They have to invest huge efforts and capital for inventing new technology and design, and to compete with the rivals. In the very beginning Malaysia was not able to support with adequate technology and skills needed for the Proton car. To meet this situation Proton car imported technology and skills from Japanese Mitsubishi Motor Corporation and gradually localize them. For gaining more competitive advantage in technology Proton make acquisition of Lotus technologies in 1996 from ACBN Holdings from this Proton gained additional source of engineering and automotive expertise which led them to produce new model cars, and open new manufacturing firm.

e. Communication

For the development of any organization it is very much necessary to have effective communication with its stakeholders. The success of the business depends on the effective communication with the parties. Proton car have established Proton City for their all manufacturing activities. This made easier for communicating with the employees and management. They use internet for communicating with the worldwide business territory. Proton car depend for supplies on the local market this make easier for them to maintain a strong supply chain. Proton car emphasized on the advertisement for making effective communication with their customers. They take huge promotional activities while launching new product like press conference, web advertisement, television commercial, sponsoring various cultural activities etc. As a result it seems to be easier for them to aware the customers. For controlling and managing their work they generally use direct supervision of the experts, resultant for the good adjustment with the company's objectives.

f. Freedom of action

The management system of Proton is much flexible for the employees. They enjoy the rights to share their feelings, suggestions, complains, and any other comments. Moreover their organizational hierarchy is flexible enough to get reach of the high authority. Proton takes the suggestions of employees and makes decision depending on this. This ensures the employee rights and let the worker do their work in independent way with accomplishing much responsibility, resultant greater productivity and success.

g. Censorship on the internet

One important way for collecting information with the customers is internet. Proton car uses this way as a great opportunity. All the information about the products of Proton is easily available in the internet, after that if any customer have any query about any sort of things of Proton car they can easily collect this by asking questions on the website of the Proton car. For the shareholders Proton car publishes their financial statement, corporate information on their website. So it becomes easy for the interested parties to collect information from the internet. But all sorts of information are not available on the internet such as their internal decision making process, management strategy, research and development work etc. because this will be a threat for them to their growth and continuing their business.

h. Computers and work

For gaining the competitive advantage Proton car maintain fully computer based manufacturing process. They are investing a lot in research and development activities for making their manufacturing process easier and competitive by acquiring more advanced computer based manufacturing system. For maintaining all the communication and management process they use computerized system as a result it becomes easy for them to share their information with their venture in any country of the world.

i. Law:

As most of the equity of Proton is owned by the government it enjoys much flexibility of the laws and gets advantage from the taxes and tariff. On the other hand there are restrictions on the import of car in Malaysia as a result they get competitive advantage from here. As Malaysia is a member of ASEAN Proton car also get some advantage on the intra-regional tariffs and non-tariff barriers, and also get easy access to larger market as having the Government organization of Malaysia. Though while entering in the foreign market Proton has to cope with the local laws and regulations of the country. This was not much harder for them as they got bargaining power because of the close relationship with the host country Government.

j. Security

As a car manufacturing organization Proton car must give importance on the security of the workers. For this Proton car take several security strategies for their manufacturing plant employees, it is also a basic human needs. For providing factory security they took several initiatives such as, installing fire extinguisher, safety jackets, and fire escape etc. Moreover Proton car ensure the job security of the employees by implementing specific rules. These initiatives make the employee more motivated and devoted towards the organizations.


As a car manufacturer organization Proton car is influenced by these environmental factors. If they fail to face with these ethical issues it will hamper their production as well as profitability.

Answer to the question no 3

a. Globalization

Globalization refers to the propensity of the businesses, culture or technology to spread out over the world. Globalization has both positive and negative side as globalization has the potential to create opportunities for the business to spread over the world and get access to a greater marketplace. On the other hand some people believe that globalization will only increase the opportunity for the developed nations and developing and under-developed nations will be less benefited from the globalization process. However the impact of Globalization has changed our world drastically as a result any changes in one area affect others. The business of Proton car is also faced some opportunities and challenges for the Globalization process that are described below:

Positive effects of Globalization

* In the beginning of the venture of Proton car Malaysia has lack of technological knowledge and skilled workers. They solve this problem by making contact with Japanese car maker Mitsubishi Motor Corporation. Proton car made arrangement of adequate training, supervision, setup, preparing for manufacturing process from the Mitsubishi Motor Corporation. This becomes possible only for the Globalizations.

· Ties with other ASEAN markets are strengthening all the time through AFTA induced tariff reductions, which will provide advantages for carmakers basing themselves in Malaysia. The market continues to attract investment from major carmakers, with General Motors (GM) forming a tie-up with DRB-HICOM in August 2007.

· As the national demand for car is decreased and Proton car started losing the market share they increase their business area by the means of Global business. They launched their venture in Thailand, Indonesia, Australia, United Kingdom, Myanmar, and in so many countries. As a result they in the decline stage they get access to large market.

* The entry of Danish vehicle tuner Kleeman could provide a boost for the premium vehicle segment. Proton's export plans could help to offset its declining domestic influence and improve its global performance.

Negative effects of Globalization

* Proton car was the market leader of Malaysian car industry, while the other car manufacturers entered in the Malaysian market it started to lose the market share.

* Malaysia's trade disagreement with Thailand over non-trade barriers in the automotive industry hamper the exporting activities of the business as result Proton car may lose a large market.

* To cope with the rapid change of the technology and large number of customer Proton car needs to invest more in research and development activities and launch a large variety of product to meet with the demand of the customers. As a result it became difficult to reach the break-even of the products.

Globalization has brings both positive and negative impact on the business of Proton car they just need to cope with the challenges of globalization and use the opportunities in a better way.

b. Developments in Information, Communications and Technology

One objective of establishing Proton car is the technological enrichment of Malaysia. They fulfill this objective by localizing the technology. They also are establishing Proton City that will be the home of Malaysian Automobile industry. Here they also centralize a University that will foster the technological development activities. For technological enrichment they also make acquisition of Lotus, MV Agusta. In 2005 the market share of Proton was decreased from 60% to 30% the reason behind this is to lack in invention of new technology. They cope up with this situation Proton invested much amount in research and development. Not only that they make the strategy for having a greater budget on research and development. For racing with the changing demand and technology Proton car also take several strategies like “Zero defects” campaign, Car-scrapping Scheme etc.

Proton accomplishes its all global and home transaction through the banking channel. And for the internal system control they have their own Management Information System. Through it all the decision making process become structured and data are easily available for support the decision of the employees or to make analysis for any new situation.

Proton's total manufacturing process is computer controlled. But for developing the system and gaining competitive advantage they are analyzing for developing the system.

c. Culture:

Culture of any organization is generally consists of corporate culture and corporate governance. These have tremendous effect on the operations of Proton. For better productivity and performance organization must build strong corporate culture and governance. The effects of corporate culture and governance on the business of proton car are discussed below:

Corporate Culture

Though most of the share (42%) of Proton is owned by Malaysian Government, its corporate culture is different than others Government owned organization. It gives value of the comments and suggestion of the employees and having a friendly environment. All the workers are helpful to others and they co-operate each others. Proton has certain norms and values for their organization and every employee respect and follows these values and norms. Flat hierarchy also make easier to communicate with the top level employee if any problem arises. Moreover direct physical supervision also makes it easy for the employee to get acquainted with the expectations of the top level employees.

Corporate Governance:

For managing the organization and continuing the operations successfully Proton established and maintains a strong Corporate Governance. The main objective of this Governance is to:

* Distributing the responsibilities in a structured way.

* Evaluation of employees on effective manner.

* Make the best use of the opportunities and resources

* Protect the interest of shareholders and so on.

For maintaining their Corporate Governance Proton established some bodies as:

1. Board of Directors

2. Board Executive Committee

3. Board Audit Committee

4. Board Risk Management Committee

5. Board Nomination Committee

6. Board Disciplinary Committee.

These boards consists the Corporate Governance of Proton and maintain it all the times.

d. Power

Malaysian Government is in full favor for the betterment of the Proton. As a result they gain competitive advantage. There are several barriers and higher tariff for importing foreign car as a result Proton becomes the market leader of the country. They also get Governmental influence while going for international business. As Malaysia is a member of ASEAN they manage non-tariff quotas on the neighboring country. Moreover Malaysian Government also bargains on the favor of Proton.

e. Politics

Being the national organization of Malaysia Proton faces several political opportunities in both host and home country. They get reduction on tariff for having political influences in several countries. Proton tries to have good relationship with the home country government. Otherwise they may face difficulty in their operations. Proton uses their political influence as their competitive advantage. Sometimes this may also bring threat for them as Malaysia's trade dispute with Thailand causes a difficulty on the Thailand operations of Proton.

f. Law

Different laws can affect the business of Proton. As a result legal environment must be considered by the organization while operating the business both in national and international business. Specially labor Act, consumer protection Act etc. If there are any changes in the legal environment of the country Proton must change or revise the strategy that may conflict with the law. All the strategy taken by the Proton must be supported by the law otherwise they may face legal suits for not obeying the law. This may hamper the image of the organization as well as brand.

g. Choice

Proton invests a huge amount in research and development for inventing new technology and make product as per the demand of the customers. Their objective is to provide quality products at a lower cost than the rivals and give emphasis on the betterment of the customers. The reasons for choosing the products of Proton are given below:

1. More features in a reasonable price

2. Attractive design of the cars

3. Designed for the comfort of the passengers

4. Ensures passenger security.

5. Offered in a package customers don't need to add extra features if they want.

6. Longevity.

7. Zero-defect on the products

8. Wide varieties of models for meet with the requirement of customers and so on.

These features attract the customers towards the product of Proton.


These factors can affect the business of Proton car in various ways. As these factors are always changing so Proton need to set strategy and be much flexible as per the demand of the situation.

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